Proxy Advisor Backs H-P/Compaq Combination

Rockville, Maryland-based Institutional Shareholder
Services (ISS) has thrown its support to the proposed $22
billion deal – and analysts expect the recommendation to
influence the final decision by a significant number of
institutional investors.

Thanks, But?

Patrick McGurn, a vice president at ISS told a press
conference. “While Mr. Hewlett makes a credible case that
the risks associated with the transaction are real and
material, we believe that management’s upside scenario is
achievable.”

But ISS also said it believes that dissident shareholder
and board member Walter Hewlett “deserves shareholders’
thanks” for raising key questions about the deal, according
to the Wall Street Journal.

Institutional ‘Bias?’

More than half (57%) of H-P shares are held by
institutions, 25% by individuals and 18% by the Hewlett and
Packard families. That latter group has taken a
firm and vocal position against the proposed
merger.

Analysts expect 10% or more of HP shareholders,
including index funds and Barclays Global Investors, whose
CEO sits on the HP board, to follow the ISS recommendation,
according to Reuters. ISS advises 700 funds how to
vote in proxy battles.

HP shareholders vote on the deal in a March 19 meeting,
and Compaq will consider the merger a day later.